Exhibit 99.1
Tesoro Reports Third Quarter Earnings
SAN ANTONIO--(BUSINESS WIRE)--Nov. 4, 2004--Tesoro Petroleum Corporation
(NYSE:TSO) today reported net earnings of $64.6 million, or $0.93 per
share, for the third quarter of 2004 compared to net earnings of $70.6
million, or $1.09 per share, for the third quarter of 2003.
As reported in the attached financial information, results for the
third quarter include after-tax charges of $12.7 million, or $0.18 per
share, to write-off premiums and unamortized debt issuance costs in
connection with the Company's prepayment of almost $400 million of
debt during the quarter. Excluding these special items, net earnings
for the quarter were $77.3 million, or $1.11 per share, compared to
net earnings excluding special items for the third quarter of 2003 of
$77.1 million, or $1.19 per share.
For the first nine months of 2004, the company reported net
earnings of $328.1 million, or $4.79 per share, compared to net
earnings of $84 million, or $1.30 per share, for the first nine months
of 2003. Excluding special items, net earnings for the nine months of
2004 were $342 million, or $4.99 per share, compared to net earnings
excluding special items of $117.2 million, or $1.81 per share, for the
first nine months of 2003.
"This was another very successful quarter for our company.
Industry margins continued to be better than historical averages and
exceeded margins in the third quarter of 2003, operational reliability
was excellent and our total throughput was our second best ever," said
Bruce A. Smith, Chairman, President and CEO of Tesoro. "Throughput and
the quarter's financial results could have meaningfully been better
without the planned coker turnaround at Golden Eagle. Tesoro began the
coker turnaround on September 6th which limited our total throughput
at that facility and also reduced the amount of lower cost heavy crude
that we could process. In addition, to sustain gasoline production, we
purchased higher-cost, lighter crudes and processed more intermediate
feedstocks. Using our actual margins, we estimate that we lost the
opportunity to generate another $34 million of operating income due to
this turnaround."
Tesoro stated that the Golden Eagle coker turnaround was completed
October 31st and the facility is currently operating at its planned
throughput rate of approximately 160,000 barrels per day.
"Our third quarter financial results were also impacted by the
decision to prepay debt," Smith continued. "In June of 2002, we
announced a plan to reduce our debt by $500 million. Including the
$400 million of debt we repaid in the third quarter, debt is down
nearly $900 million, debt to total capitalization has decreased to 48%
and cash at September 30th was over $200 million."
"Our commitment to shareholders to grow the value of Tesoro is
being recognized by investors and I believe our track record over the
past two and a half years confirms our ability to improve future
shareholder value," added Smith.
Public Invited to Listen to Analyst Conference Call via Internet
At 2 p.m., CT, Thursday, November 4, 2004, Tesoro will broadcast,
live, its conference call with analysts regarding third quarter 2004
results. Interested parties may listen to the live conference call
over the Internet by logging on to Tesoro's Internet site at
http://www.tesoropetroleum.com and clicking on the "What's New"
section.
Tesoro Petroleum Corporation, a Fortune 500 Company, is an
independent refiner and marketer of petroleum products. Tesoro
operates six refineries in the western United States with a combined
capacity of nearly 560,000 barrels per day. Tesoro's retail-marketing
system includes over 500 branded retail stations, of which over 200
are company operated under the Tesoro(R) and Mirastar(R) brands.
This news release contains certain statements that are
"forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements concern the company's
expectation of improved shareholder value. Factors which can cause
actual results to differ from these forward-looking statements
include: changes in general economic conditions, the timing and extent
of changes in demand for refined products, availability and cost of
crude oil, other feedstocks or refined products, throughput and yield
levels, disruptions due to equipment interruptions or failure at our
or third-party facilities, political developments and other factors
beyond our control. For more information concerning these factors and
other factors that could cause such a difference, see our annual
report on Form 10-K and quarterly reports on Form 10-Q, filed with the
Securities and Exchange Commission. We undertake no obligation to
publicly release the result of any revisions to any such
forward-looking statements that may be made to reflect events or
circumstances that occur, or which we become aware of, after the date
hereof.
TESORO PETROLEUM CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2004 2003 (a) 2004 2003 (a)
-------- --------- --------- --------
Revenues $3,288.5 $ 2,330.0 $ 8,873.4 $6,732.5
Costs and Expenses:
Costs of sales and
operating expenses 3,053.2 2,096.2 7,967.2 6,206.9
Selling, general and
administrative
expenses (b) 37.8 28.3 107.5 98.7
Depreciation and
amortization 36.3 36.7 111.1 110.4
Loss on asset sales and
impairments (a) 0.6 9.2 4.7 10.3
-------- --------- --------- --------
Operating Income 160.6 159.6 682.9 306.2
Interest and Financing
Costs, Net (c) (52.9) (45.9) (136.0) (171.1)
-------- --------- --------- --------
Earnings Before
Income Taxes 107.7 113.7 546.9 135.1
Income Tax Provision 43.1 43.1 218.8 51.1
-------- --------- --------- --------
Net Earnings $ 64.6 $ 70.6 $ 328.1 $ 84.0
======== ========= ========= ========
Net Earnings Per Share:
Basic $ 0.98 $ 1.09 $ 5.02 $ 1.30
Diluted $ 0.93 $ 1.09 $ 4.79 $ 1.30
Weighted Average Common
Shares:
Basic 65.6 64.6 65.3 64.6
Diluted 69.5 64.9 68.5 64.8
- -----------------------------
(a) The 2003 results include the marine services operations, which
were sold in December 2003. In September 2003, the Company
recorded a pretax loss of $7.6 million, or $0.07 per share,
reflecting the sales value of the assets and estimated selling
costs.
(b) Includes stock-based compensation for stock options and other
stock-based awards totaling $3.3 million and $9.0 million
during the three months and nine months ended September 30,
2004, respectively. The fair value method of accounting for
stock options was adopted on January 1, 2004 and, therefore,
compensation expense associated with stock options was not
recorded during 2003.
(c) During the three months ended September 30, 2004, the Company
wrote off unamortized debt issuance and discount costs of $9.3
million and incurred redemption premiums of $11.9 million
associated with the voluntary prepayments of the 9% senior
subordinated notes and senior secured term loans. In addition,
the Company recorded charges of $2.0 million during the nine
months ended September 30, 2004 for financing costs related to
amending both the 8% senior secured notes and the senior
secured term loans. During the three months and nine months
ended September 30, 2003, the Company wrote-off $2.9 million
and $36.2 million, respectively, of unamortized debt issuance
costs related to voluntary prepayments of debt and the
replacement of the Company's previous credit facility with a
new credit agreement and term debt.
NET EARNINGS ADJUSTED FOR SPECIAL ITEMS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2004 2003 (a) 2004 2003 (a)
-------- --------- --------- --------
Net Earnings - U.S. GAAP $ 64.6 $ 70.6 $ 328.1 $ 84.0
Special Items, Aftertax:
Financing costs related
to debt prepayments
and refinancing (c) 12.7 1.8 13.9 22.8
Loss on sale of Marine
Services (a) -- 4.7 -- 4.7
Early retirement and
severance costs -- -- -- 5.7
-------- --------- --------- --------
Net Earnings Adjusted for
Special Items $ 77.3 $ 77.1 $ 342.0 $ 117.2
======== ========= ========= ========
Net Earnings Per Share -
U.S. GAAP $ 0.93 $ 1.09 $ 4.79 $ 1.30
Special Items Per Share,
Aftertax:
Financing costs related
to debt prepayments
and refinancing (c) 0.18 0.03 0.20 0.35
Loss on sale of Marine
Services (a) -- 0.07 -- 0.07
Early retirement and
severance costs -- -- -- 0.09
-------- --------- --------- --------
Net Earnings Per Share
Adjusted for Special Items $ 1.11 $ 1.19 $ 4.99 $ 1.81
======== ========= ========= ========
- -----------------------------
Note: The special items present information that the Company believes
is useful to investors, relating to prepayments and refinancing of
debt, the sale of Marine Services assets in 2003, and severance and
other reorganization costs. The Company believes that the special
items described above are not indicative of its core operations.
TESORO PETROLEUM CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2004 2003 2004 2003
--------- -------- --------- -------
Operating Income (Loss)
Refining $ 187.1 $ 175.4 $ 766.2 $ 356.9
Retail 1.1 6.6 (4.6) 8.8
Marine Services (a) -- 2.1 -- 4.9
-------- -------- ------- -------
Total Segment
Operating
Income 188.2 184.1 761.6 370.6
Corporate and
Unallocated Costs (d) (27.0) (15.3) (74.0) (54.1)
Loss on Asset Sales
and Impairments (a) (0.6) (9.2) (4.7) (10.3)
-------- -------- ------- -------
Operating
Income 160.6 159.6 682.9 306.2
Interest and
Financing Costs,
Net (c) (52.9) (45.9) (136.0) (171.1)
-------- -------- ------- -------
Earnings Before
Income Taxes $ 107.7 $ 113.7 $ 546.9 $ 135.1
======== ======== ======= =======
Depreciation and
Amortization
Refining $ 30.1 $ 29.5 $ 92.9 $ 88.9
Retail 4.5 4.7 13.3 14.7
Marine Services (a) -- 0.6 -- 2.0
Corporate 1.7 1.9 4.9 4.8
-------- -------- ------- -------
Depreciation and
Amortization $ 36.3 $ 36.7 $ 111.1 $ 110.4
======== ======== ======= =======
Capital Expenditures
Refining $ 37.4 $ 22.4 $ 80.7 $ 64.8
Retail 0.4 0.3 1.4 0.6
Marine Services (a) -- 0.2 -- 0.6
Corporate 1.4 0.4 3.4 0.9
-------- -------- ------- -------
Capital
Expenditures $ 39.2 $ 23.3 $ 85.5 $ 66.9
======== ======== ======= =======
- -----------------------
(d) Corporate and unallocated costs for the nine months ended
September 30, 2003 include charges of $4.7 million in
reorganization costs, primarily a non-cash charge for
voluntary early retirement benefits and severance payments. An
additional $4.3 million of reorganization costs were charged
to the operating segments during 2003, including $2.6 million
in refining, $1.3 million in retail and $0.4 million in marine
services.
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
September 30, December 31,
2004 2003
------------- -------------
Total Assets $ 4,131.3 $ 3,661.3
Total Debt $ 1,217.1 $ 1,608.8
Total Stockholders' Equity $ 1,314.6 $ 965.4
Total Debt to Capitalization
Ratio 48% 62%
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2004 2003 2004 2003
-------- -------- --------- ---------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand
barrels per day)
Heavy crude 242.4 278.9 268.2 284.2
Light crude 264.8 209.0 234.1 188.7
Other feedstocks 27.4 17.5 21.1 16.2
-------- -------- --------- ---------
Total Throughput 534.6 505.4 523.4 489.1
======== ======== ========= =========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 257.1 246.6 254.9 241.4
Jet fuel 71.2 58.5 66.5 56.8
Diesel fuel 110.7 111.0 110.0 105.4
Heavy oils, residual
products, internally
produced fuel and
other 114.2 107.8 111.1 104.1
-------- -------- --------- ---------
Total Yield 553.2 523.9 542.5 507.7
======== ======== ========= =========
Refining Margin
($/throughput bbl) (e)
Gross $ 8.27 $ 8.24 $ 9.73 $ 7.04
Manufacturing cost
before depreciation
and amortization (e) $ 2.96 $ 2.80 $ 2.89 $ 2.83
Segment Operating Income
($ millions)
Gross refining margin
(after inventory
changes) (f) $ 402.8 $ 376.3 $ 1,389.8 $ 938.8
Expenses (g)
Manufacturing costs 145.4 130.0 414.2 377.8
Other operating
expenses 34.4 34.9 98.9 93.8
Selling, general and
administrative 5.8 6.5 17.6 21.4
Depreciation and
amortization (h) 30.1 29.5 92.9 88.9
-------- -------- --------- ---------
Segment Operating
Income $ 187.1 $ 175.4 $ 766.2 $ 356.9
======== ======== ========= =========
Product Sales (thousand
barrels per day) (i)
Gasoline and gasoline
blendstocks 302.6 289.4 299.9 283.8
Jet fuel 99.0 86.2 88.3 84.2
Diesel fuel 140.1 122.5 133.1 124.8
Heavy oils, residual
products and other 72.2 70.7 74.8 70.2
-------- -------- --------- ---------
Total Product
Sales 613.9 568.8 596.1 563.0
======== ======== ========= =========
Product Sales Margin
($/barrel) (i)
Average sales price $ 55.11 $ 41.06 $ 51.68 $ 40.23
Average costs of sales 47.41 33.98 42.85 34.20
-------- -------- --------- ---------
Product Sales Margin $ 7.70 $ 7.08 $ 8.83 $ 6.03
======== ======== ========= =========
- -----------------
(e) Management uses gross refining margin per barrel to evaluate
performance, allocate resources and compare profitability to other
companies in the industry. Gross refining margin per barrel is
calculated by dividing gross refining margin by total refining
throughput and may not be calculated similarly by other companies.
Management uses manufacturing costs per barrel to evaluate the
efficiency of refinery operations and allocate resources.
Manufacturing costs per barrel may not be comparable to similarly
titled measures used by other companies. Investors and analysts
use these financial measures to help analyze and compare companies
in the industry on the basis of operating performance. These
financial measures should not be considered as alternatives to
segment operating income, revenues, costs of sales and operating
expenses or any other measure of financial performance presented
in accordance with accounting principles generally accepted in the
United States of America.
(f) Gross refining margin is revenues less costs of feedstocks,
purchased products, transportation, and distribution. Gross
refining margin approximates total refining segment throughout
times gross refining margin per barrel, adjusted for changes in
refined product inventory due to selling a volume and mix of
product that is different than actual volumes manufactured. Also
includes the effect of intersegment sales to the retail segment at
prices which approximate market.
(g) Includes $2.6 million for voluntary early retirement benefits and
severance payments during the nine months ended September 30,
2003.
(h) Includes manufacturing depreciation and amortization per
throughput barrel of approximately $0.61 and $0.55 for the
three months ended September 30, 2004 and 2003, respectively,
and $0.65 and $0.58 for the nine months ended September 30,
2004 and 2003, respectively.
(i) Sources of total product sales include products manufactured at
the refineries, products drawn from inventory balances and
products purchased from third parties. Total product sales margin
includes margins on sales of manufactured and purchased products
and the effects of inventory changes.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2004 2003 2004 2003
-------- -------- -------- --------
Refining By Region
California (j)
Throughput (thousand
barrels per day)
Heavy crude 116.4 147.4 135.8 149.3
Light crude 19.9 4.2 8.3 2.7
Other feedstocks 17.2 6.3 12.1 6.2
-------- -------- -------- --------
Total Throughput 153.5 157.9 156.2 158.2
======== ======== ======== ========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 96.6 97.2 99.0 99.6
Diesel fuel 37.8 40.5 38.7 39.8
Heavy oils, residual
products, internally
produced fuel and
other 27.2 29.5 27.4 28.2
-------- -------- -------- --------
Total Yield 161.6 167.2 165.1 167.6
======== ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 11.61 $ 11.19 $ 14.16 $ 10.28
Manufacturing cost
before depreciation
and amortization $ 5.06 $ 4.39 $ 4.77 $ 4.42
Pacific Northwest (Alaska
& Washington) (k)
Throughput (thousand
barrels per day)
Heavy crude 82.2 85.6 86.4 84.3
Light crude 94.1 84.2 82.5 72.9
Other feedstocks 5.4 6.6 4.4 6.3
-------- -------- -------- --------
Total Throughput 181.7 176.4 173.3 163.5
======== ======== ======== ========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 77.0 80.3 73.5 74.0
Jet fuel 34.8 26.8 31.2 25.4
Diesel fuel 26.9 32.0 27.3 27.2
Heavy oils, residual
products, internally
produced fuel
and other 48.1 42.5 46.1 42.1
-------- -------- -------- --------
Total Yield 186.8 181.6 178.1 168.7
======== ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 7.95 $ 8.04 $ 8.83 $ 6.44
Manufacturing cost
before depreciation
and amortization $ 2.29 $ 2.11 $ 2.33 $ 2.17
Mid-Pacific (Hawaii)
Throughput (thousand
barrels per day)
Heavy crude 43.8 45.9 46.0 50.6
Light crude 41.1 34.5 38.8 26.6
-------- -------- -------- --------
Total Throughput 84.9 80.4 84.8 77.2
======== ======== ======== ========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 20.7 20.2 21.8 18.5
Jet fuel 24.6 23.0 24.5 22.9
Diesel fuel 15.2 13.5 14.5 13.5
Heavy oils, residual
products, internally
produced fuel
and other 25.9 25.0 25.4 23.4
-------- -------- -------- --------
Total Yield 86.4 81.7 86.2 78.3
======== ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 5.07 $ 4.07 $ 5.75 $ 3.16
Manufacturing cost
before depreciation
and amortization $ 1.55 $ 1.40 $ 1.44 $ 1.40
- ----------------
(j) The California refinery's scheduled maintenance turnaround, which
began during the 2004 third quarter, resulted in reduced
throughput and yield levels.
(k) Throughput and yield levels were reduced in the 2003 second
quarter during a scheduled maintenance turnaround at the Alaska
refinery.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- ----------------
2004 2003 2004 2003
------- ------- ------- -------
Mid-Continent (North Dakota &
Utah) (l)
Throughput (thousand barrels
per day)
Light crude 109.7 86.1 104.5 86.5
Other feedstocks 4.8 4.6 4.6 3.7
------- ------- ------- -------
Total Throughput 114.5 90.7 109.1 90.2
======= ======= ======= =======
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 62.8 48.9 60.6 49.3
Jet fuel 11.8 8.7 10.8 8.5
Diesel fuel 30.8 25.0 29.5 24.9
Heavy oils, residual
products, internally
produced fuel and other 13.0 10.8 12.2 10.4
------- ------- ------- -------
Total Yield 118.4 93.4 113.1 93.1
======= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 6.68 $ 7.16 $ 7.90 $ 5.75
Manufacturing cost before
depreciation and
amortization $ 2.23 $ 2.59 $ 2.22 $ 2.45
- ------------
(l) Throughput and yield levels were reduced during scheduled
maintenance turnarounds at the North Dakota refinery in the 2003
third quarter and at the Utah refinery in the 2003 first quarter.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------- ----------------
2004 2003 2004 2003
------- ------- ------- -------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated 221 228 221 228
Branded jobber/dealer 313 336 313 336
------- ------- ------- -------
Total Stations 534 564 534 564
======= ======= ======= =======
Average Stations (during
period)
Company-operated 222 228 223 229
Branded jobber/dealer 315 342 320 350
------- ------- ------- -------
Total Average Retail
Stations 537 570 543 579
======= ======= ======= =======
Fuel Sales (millions of
gallons)
Company-operated 76.6 79.1 219.1 235.8
Branded jobber/dealer 59.7 65.8 168.9 203.0
------- ------- ------- -------
Total Fuel Sales 136.3 144.9 388.0 438.8
======= ======= ======= =======
Fuel Margin ($/gallon) (m) $ 0.15 $ 0.18 $ 0.15 $ 0.17
Merchandise Sales
($ millions) $ 35.5 $ 32.8 $ 96.2 $ 87.3
Merchandise Margin
($ millions) $ 10.0 $ 9.4 $ 26.4 $ 23.6
Merchandise Margin % 28% 29% 27% 27%
Segment Operating Income
(Loss) ($ millions)
Gross Margins
Fuel (n) $ 20.4 $ 26.7 $ 56.3 $ 74.9
Merchandise and other non-
fuel margin 11.1 10.3 29.3 26.7
------- ------- ------- -------
Total Gross Margins 31.5 37.0 85.6 101.6
Expenses (o)
Operating expenses 19.4 18.3 56.2 53.7
Selling, general and
administrative 6.5 7.4 20.7 24.4
Depreciation and
amortization 4.5 4.7 13.3 14.7
------- ------- ------- -------
Segment Operating Income
(Loss) $ 1.1 $ 6.6 $ (4.6) $ 8.8
======= ======= ======= =======
- ---------------
(m) Fuel margin per gallon is calculated by dividing fuel gross margin
by fuel sales volumes. Fuel margin per gallon may not be
calculated similarly by other companies. Investors and analysts
use fuel margin per gallon to help analyze and compare companies
in the industry on the basis of operating performance. Management
uses fuel margin per gallon to compare profitability to other
companies in the industry.
(n) Includes the effect of intersegment purchases from the refining
segment at prices which approximate market.
(o) Includes $1.3 million for voluntary early retirement benefits and
severance payments during the nine months ended September 30,
2003.
CONTACT: Tesoro Petroleum Corporation, San Antonio
Investors:
John Robertson, 210-283-2687
or
Media:
Tara Payne, 210-283-2676